Thursday, June 14, 2012

BullS**t Ad Infinitum

Before we get serious, let us laugh out loud seeing the sheer stupidity all around and how the market is moving like drunken sailor with a bottle in hand. My apologies to the drunk sailor for inappropriate comparison. 

On Monday the market was down, on Tuesday the market was up, on Wednesday the market was down, today the market was up and any takers for tomorrow? If I have to guess, I would write: trend is down tomorrow. However, in my defense, I did write yesterday that if Euro holds 1.2550 levels, we will see green day.  Not that I know any better. Sometimes we just get lucky. I think I wrote sometimes back, better be lucky than smart!

But you have to give credit to the Boyz. The rumour was brilliant and like true pavlovian dogs  the market spiked up. As Josh Brown says :” Central bank rumors are like big boobs - some are real and some are fake, but most guys are happy to play either way.”  I feel bad for the guys who were short in the morning and I still maintain that there are lots of bad shorts out there who are trapped. Folks who are short from 1284 level. And it also demonstrates that the market believes in coming QE and is waiting to jump on the bandwagon. It is not a question of whether it will come; it is, when it will come.  And is the selling / correction over?  Again, my feeling is, not yet but we are getting close.

Today’s rumour fueled tape fudging was strictly for the day traders. If you are a normal human being, looking to safeguard your assets and investment, you should totally ignore it. It’s fake, fake and fake.

We are still in that triangle which I showed yesterday. I did not do anything new to it apart from today’s market action and that is all the TA you need to know.

There are few takes from all these nonsense:
·         They will again try to solve the problems of the world with more debt and liquidity because that is the only thing they know.
·         At some point deflation will give way to inflation and the monetization of debt will start in earnest. Already the Fed is buying the Treasury Notes it sold just hours back. It happened today and yesterday and they are not even trying to hide it anymore.
·         With inflation come higher interest rates. The bond trade is about to turn upside down.  Trillions are invested in bonds, much more than in equity. And the pain will be felt many times over.
·         They are desperate to maintain the status quo and losing the game. They know it and are scared. Already there is talk of capital control in Europe. Worse things will follow.

Pay particular attention to what is happening to US bonds. Europe does not really matter. I think we will see the high of TLT by June 22nd.  If I had any investment in bonds or bond funds, I would get out in any new bond rally.  For now, just avoid the temptation to chase the momentum like plague. I keep repeating, we are not going to miss anything worthwhile and the only rule of the game: Do not lose capital. I am not touching anything in the market with a 20 ft bargepole till end of next week.

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